EMC: Street Applauds New Gear (Correction)

By Tiernan Ray

EMC (EMC) today unveiled a new line of lower-cost storage equipment, called the “VNX” line, meant to lure more buyers in the small and medium business market. My colleague Mark Veverka previewed the announcement in his “Plugged In” column over the weekend. EMC shares today are responding well, rising 23 cents, or 1%, to $24.77.

Jayson Noland, RW Baird & Co.: Reiterates an Outperform rating, while raising his price target to $30 from $25. Most of the announcement was known, but he was still surprised by the breadth of the offerings. Looking ahead to the Q4 earnings announcement on January 25th, Noland writes that it was probably “solid” — a little bit of lost sales at the low end, as buyers waited for today’s product announcement, but better traction at the high end, with resellers commenting lately on “large deal traction in Q4.”

Brent Bracelin, Pacific Crest: Reiterates an Outperfrom rating and sees upside above $40 per share, though his official 12-month target is $30. EMC has simplified its “mid-range” from two product lines to one, and that should help the company gain market share, Bracelin believes. There’s going to be a lot of compares and contrasts made with the product line of NetApp (NTAP), but Bracelin sees both companies thriving this year. (Though he has a Sector Perform rating on NTAP.) 70% of the storage market is still “up for grabs” counting the combined share of both companies.

Shebly Seyrafi, Capstone Investments: Reiterates a Buy rating and a $26 price target. He also believes the VNX gear will increase market share: “This announcement should help catalyze growth in EMC’s midrange as this segment had been exhibiting weakness lately.” The data duplication device, the “DD890,” should make things tougher on competitor Quantum (QTM), he thinks. It has a throughput rate of 14.7 terabytes an hour, higher than Quantum’s DXi8500, at 6.4 terabytes. EMC will have “bragging rights” with this product.

Keith Bachman, BMO Capital: Raised his rating to Outperform on EMC, from Market Perform, with a $30 price target, up from $24. Interestinly, Bachman’s price target has nothing to do with VNX — it’s all about VMWare (VMW). Bachman raised his price target on VMW shares to $90 from $70, and “EMC can move higher as long as VMW remains around its current range.” As regards VNX, hower, it’s a positive development for EMC, despite losing some sales support from Dell (DELL), as the new gear is widely expected to challenge Dell’s offerings. VMWare is expected to report earnings next Monday, January 25th.

Correction: An earlier version of this post mis-stated the price target set by Jayson Noland of Baird. My apologies for any confusion caused by this error.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.